The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and the notes thereto included in Item 1 in
this Quarterly Report on Form 10-Q, or this Quarterly Report. The following
discussion should also be read in conjunction with our audited consolidated
financial statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in our
Annual Report on Form 10-K for the year ended December 31, 2020.



Unless otherwise provided in this Quarterly Report, references to the "Company,"
"we," "us," and "our" refer to Puma Biotechnology, Inc., a Delaware corporation,
together with its wholly owned subsidiaries.



Overview



We are a biopharmaceutical company with a focus on the development and
commercialization of innovative products to enhance cancer care. We in-licensed
from Pfizer, Inc., or Pfizer, the global development and commercialization
rights to PB272 (neratinib, oral), PB272 (neratinib, intravenous) and PB357.
Neratinib is a potent irreversible tyrosine kinase inhibitor, or TKI, that
blocks signal transduction through the human epidermal growth factor receptors,
HER1, HER2 and HER4. Currently, we are primarily focused on the development and
commercialization of the oral version of neratinib, our most advanced drug
candidate is directed at the treatment of HER2-positive breast cancer and HER2
mutated cancers. We believe neratinib has clinical application in the treatment
of several other cancers as well, including other tumor types that over-express
or have a mutation in HER2 or EGFR, such as breast cancer, cervical cancer, lung
cancer or other solid tumors.



Prior to 2017, our efforts and resources had been focused primarily on acquiring
and developing our pharmaceutical technologies, raising capital and recruiting
personnel. In 2017, the U.S. Food and Drug Administration, or FDA, approved
NERLYNX, formally known as PB272 (neratinib, oral), for the extended adjuvant
treatment of adult patients with early stage HER2-overexpressed/amplified breast
cancer following adjuvant trastuzumab-based therapy. In February 2020, NERLYNX
was also approved by the FDA in combination with capecitabine for the treatment
of adult patients with advanced or metastatic HER2-positive breast cancer who
have received two or more prior anti-HER2-based regimens in the metastatic
setting. In 2018, the European Commission, or EC, granted marketing
authorization for NERLYNX in the European Union for the extended adjuvant
treatment of adult patients with early-stage hormone receptor positive
HER2-overexpressed/amplified breast cancer and who are less than one year from
the completion of prior adjuvant trastuzumab-based therapy.



We have entered into exclusive sub-license agreements with various parties to
pursue regulatory approval, if necessary, and commercialize NERLYNX, if
approved, in numerous regions outside the United States, including Europe
(excluding Russia and Ukraine), Australia, Canada, China, Southeast Asia,
Israel, Mexico, South Korea, and various countries and territories in Central
and South America. We plan to continue to pursue commercialization of NERLYNX in
other countries outside the United States, if approved.



In July 2021, our Canadian partner, Knight Therapeutics, Inc., received Health
Canada's approval of an alternate dosing regimen (two-week dose escalation) to
be incorporated into the prescribing information.



On July 23, 2021, we entered into a note purchase agreement with Athyrium
Opportunities IV Co-Invest 1 LP ("Athyrium") for an aggregate principal amount
of $100.0 million. The borrowings under the Athyrium Note Purchase Agreement
("Athyrium Notes"), together with cash on hand, were used to repay the
outstanding indebtedness, including the applicable exit and prepayment fees owed
to lenders under our Oxford Credit facility. See Note 10, Debt for further
details regarding both the Athyrium Notes and Oxford Loan and Security
Agreement.



    Our expenses to date have been related to hiring staff, commencing
company-sponsored clinical trials and the build out of our corporate
infrastructure and, since 2017, the commercial launch of NERLYNX. Accordingly,
our success depends not only on the safety and efficacy of our product
candidates, but also on our ability to finance product development. To date, our
major sources of working capital have been proceeds from product and license
revenue, public offerings of our common stock, proceeds from our credit facility
and sales of our common stock in private placements.



Impact of COVID-19



Our priorities during the COVID-19 pandemic continue to be focused on protecting
the health and safety of our employees while delivering on our mission to
develop and commercialize innovative products to enhance cancer care.
Substantially all geographic regions in which our U.S. sales force operates have
imposed restrictions and may in the future change or impose additional
restrictions to control or limit the spread of COVID-19 and its variants. These
restrictions include, but are not limited to "shelter-in-place" orders,
quarantines, testing requirements or similar orders or restrictions. These types
of restrictions may deter or prevent cancer patients from traveling to see their
doctors and result in a decline in revenue for NERLYNX, our only commercial
product. Additionally, the impact of COVID-19 has significantly reduced the
ability of our commercial team and our sales force to travel and interact
personally with physicians and members of the extended healthcare team. This has
reduced our commercial team's access to healthcare providers, and a large
portion of its promotional activities are now being conducted virtually.
Although we have seen some recent easing of local restrictions, these have been
inconsistent and have not led to a broad relaxation of requirements. These types
of restrictions have adversely impacted our ability to engage with our customers
and have adversely impacted sales of NERLYNX, and they may continue to do so.
The respective commercial teams affiliated with certain companies to which we
sub-license the commercial rights to NERLYNX, and on which we rely for our
international sales, have chosen or have been forced to take similar action, and
other sub-licensees of NERLYNX may choose or be forced to take similar action in
the future. Furthermore, the COVID-19 pandemic has resulted in dramatic
increases in unemployment rates, which may result in a substantial number of
people becoming uninsured or underinsured. Any of these developments may have an
adverse effect on our revenue. We have observed disruptions in patient
enrollments in the United States and in our Phase II SUMMIT basket trial. If the
COVID-19 pandemic continues to spread in the geographies in which we are
conducting clinical trials, we may experience additional disruptions in those
clinical trials, which could have a material adverse impact on our clinical
trial plans and timelines.



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Our ability to continue to operate without any significant negative impacts will
in part depend on the length and severity of the COVID-19 pandemic and our
ability to protect our employees and our supply chain. We continue to follow and
monitor recommended actions of government and health authorities to protect our
employees worldwide. For the nine months ended September 30, 2021, we and our
key third-party suppliers and manufacturers were able to broadly maintain
operations. We rely exclusively on third-party manufacturers to manufacture
NERLYNX.



 On October 29, 2021, the parties to our class action lawsuit informed the court
that they had reached a settlement in principle, and the court entered judgment
in the amount of claimed damages and prejudgment interest totaling approximately
$54.2 million. On November 2, 2021, the court dismissed the case in light of the
parties' settlement, retaining jurisdiction only for settlement approval. The
parties' settlement in principle provides that there will be no judgment for
liability entered against us or Mr. Auerbach, and provides for payment by us of
approximately $54.2 million in two installments, to be paid in January and June
of 2022. The settlement in principle is subject to execution of a formal
settlement agreement to be negotiated among the parties, which agreement will be
submitted to the court for approval. For additional detail regarding the class
action lawsuit, see Part II. Item 1. Legal Proceedings in this Quarterly Report
on Form 10-Q.



We intend to satisfy our near-term liquidity requirements through a combination
of our existing cash and cash equivalents and marketable securities as of
September 30, 2021 and proceeds that will become available to us through product
sales, royalties and sub-license milestone payments. However, this intention is
based on assumptions that may prove to be wrong. Changes may occur that would
consume our available capital faster than anticipated, including the length and
severity of the COVID-19 pandemic and measures taken to control the spread of
COVID-19, as well as changes in and progress of our development activities, the
impact of commercialization efforts, acquisitions of additional drug candidates
and changes in regulation. Some of these developments have had and may continue
to have an adverse effect on our revenue and thus could have an adverse effect
on our ability to satisfy the minimum revenue covenants in our Note Purchase
Agreement.



Our consolidated financial statements as of and for the three and nine months
ended September 30, 2021 have been prepared on the basis that we will continue
as a going concern, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. Based on our cash
and marketable securities balances, recurring losses since inception and recent
developments in our class action litigation, there is substantial doubt about
our ability to continue as a going concern, due to our minimum cash financial
covenant. Our ability to continue as a going concern is dependent upon our
ability to raise additional capital to sustain operations and continue to
commercialize neratinib. We cannot assure you that such funding will be
available on commercially reasonable terms, or at all.



Critical Accounting Policies



As of the date of the filing of this Quarterly Report, we believe there have
been no material changes to our critical accounting policies and estimates
during the nine months ended September 30, 2021 from our accounting policies at
December 31, 2020, as reported in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020. We accounted for the following related to
sub-license agreements and our legal contingencies and expense during the nine
months ended September 30, 2021:



License Revenue:



We recognize license revenue under certain of our sub-license agreements that
are within the scope of ASC 606. The terms of these agreements may contain
multiple performance obligations, which may include licenses and research and
development activities. We evaluate these agreements under ASC 606 to determine
the distinct performance obligations. Non-refundable, up-front fees that are not
contingent on any future performance and require no consequential continuing
involvement by us, are recognized as revenue when the license term commences and
the licensed data, technology or product is delivered. We defer recognition of
non-refundable upfront license fees if the performance obligations are not
satisfied.



Prior to recognizing revenue, we make estimates of the transaction price,
including variable consideration that is subject to a constraint. Amounts of
variable consideration are included in the transaction price to the extent that
it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur and when the uncertainty associated with the variable
consideration is subsequently resolved. Variable consideration may include
nonrefundable upfront license fees, payments for research and development
activities, reimbursement of certain third-party costs, payments based upon the
achievement of specified milestones, and royalty payments based on product sales
derived from the collaboration.



If there are multiple distinct performance obligations, we allocate the
transaction price to each distinct performance obligation based on its relative
standalone selling price. The standalone selling price is generally determined
based on the prices charged to customers or using expected cost-plus margin.
Revenue is recognized by measuring the progress toward complete satisfaction of
the performance obligations.


Legal Contingencies and Expense:





For legal contingencies, we accrue a liability for an estimated loss if the
potential loss from any claim or legal proceeding is considered probable and the
amount can be reasonably estimated. Legal fees and expenses are expensed as
incurred based on invoices or estimates provided by legal counsel. We
periodically evaluate available information, both internal and external,
relative to such contingencies and adjust the accrual as necessary. We determine
whether a contingency should be disclosed by assessing whether a material loss
is deemed reasonably possible. In determining whether a loss should be accrued,
we evaluate, among other factors, the degree of probability of an unfavorable
outcome and the ability to make a reasonable estimate of the amount of the loss
(see Note 13, Commitments and Contingencies in the accompanying notes to the
financial statements).



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Summary of Income and Expenses





Product revenue, net:



Product revenue, net consists of revenue from sales of NERLYNX. We sell NERLYNX
to a limited number of specialty pharmacies and specialty distributors in the
United States. We record revenue at the net sales price, which includes an
estimate for variable consideration for which reserves are established. Variable
consideration consists of trade discounts and allowances, product returns,
provider chargebacks and discounts, government rebates and other incentives.



License revenue:


License revenue consists of consideration earned for performance obligations satisfied pursuant to our sub-license agreements.





Royalty revenue:



Royalty revenue consists of consideration earned related to product sales made
by our sub-licensees in their respective territories pursuant to our sub-license
agreements.



Cost of sales:



Cost of sales consists of third-party manufacturing costs, freight, and indirect
overhead costs associated with sales of NERLYNX. Cost of sales also includes
period costs related to royalty charges payable to Pfizer, the amortization of
milestone payments made to Pfizer, certain inventory manufacturing services,
inventory adjustment charges, unabsorbed manufacturing and overhead costs, and
manufacturing variances.


Selling, general and administrative expenses:





Selling, general and administrative expenses, or SG&A Expenses, consist
primarily of salaries and payroll-related costs, stock-based compensation
expense, professional fees, business insurance, rent, general legal activities,
credit loss expense and other corporate expenses. We expense SG&A Expenses as
they are incurred.


Research and development expenses:





Research and development expenses, or R&D Expenses, include costs associated
with services provided by consultants who conduct and perform clinical services
on our behalf and contract organizations for the manufacturing of clinical
materials. During the three and nine months ended September 30, 2021 and 2020,
our R&D Expenses consisted primarily of clinical research organization, or CRO,
fees; fees paid to consultants; salaries and related personnel costs; and
stock-based compensation. We expense our R&D Expenses as they are incurred.
Internal R&D Expenses primarily consist of payroll-related costs and also
include equipment costs, travel expenses and supplies.



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Results of Operations


Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020





Total revenue:



For the three months ended September 30, 2021, total revenue was approximately
$46.2 million, compared to $50.8 million for the three months ended September
30, 2020.



Product revenue, net:



Product revenue, net was approximately $43.4 million for the three months ended
September 30, 2021, compared to $49.3 million for the three months ended
September 30, 2020. This decrease in product revenue, net was primarily
attributable to a volume decrease of approximately 18.0% in bottles of NERLYNX
sold and an increase in reserves for variable consideration from approximately
15.8% of product revenue for the three months ended September 30, 2020 compared
to approximately 19.4% of product revenue, for the three months ended September
30, 2021 offset by increases in the gross selling price that occurred in the
third quarter of 2020 and in the first and third quarter of 2021. The increase
in reserves for variable consideration is primarily due to an increase in
Medicaid claims and government chargebacks as a percentage of gross revenue.



Royalty revenue:


Royalty revenue was approximately $2.8 million for the three months ended September 30, 2021, compared to $1.4 million for the three months ended September 30, 2020. The increase was due to increased product sales by our sub-licensees as they continue to commercialize NERLYNX in additional territories.





Cost of sales:



Cost of sales was approximately $10.3 million for the three months ended
September 30, 2021, compared to $9.9 million for the three months ended
September 30, 2020. The increase was primarily attributable to the increase in
the amortization of the intangible asset under our license agreement with Pfizer
and increased royalty expense due to Pfizer.



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Selling, general and administrative expenses:





For the three months ended September 30, 2021, SG&A Expenses were approximately
$26.1 million, compared to approximately $29.6 million for the three months
ended September 30, 2020. SG&A Expenses for the three months ended September 30,
2021 and 2020 were as follows:



Selling, general, and administrative expenses For the Three Months Ended

                   Change
(in thousands)                                            September 30,                    $               %
                                                    2021                2020           2021/2020       2021/2020
Payroll and related costs                       $       9,514       $      10,274     $      (760 )          -7.4 %
Professional fees and expenses                          9,612              11,271          (1,659 )         -14.7 %
Travel and meetings                                     1,338               1,090             248            22.8 %
Facilities and equipment costs                          1,380               1,412             (32 )          -2.3 %
Stock-based compensation                                2,948               4,101          (1,153 )         -28.1 %
Other                                                   1,292               1,450            (158 )         -10.9 %
                                                $      26,084       $      29,598     $    (3,514 )         -11.9 %



For the three months ended September 30, 2021, SG&A Expenses decreased by approximately $3.5 million compared to the same period in 2020, primarily attributable to the following:

? a decrease in professional fees and expenses of approximately $1.7 million,

consisting of approximately $1.3 million of lower consultant expenses

associated with marketing and commercialization support, and a decrease of


    approximately $0.4 million in legal fees;



? a decrease in stock-based compensation expense of approximately $1.2 million

primarily due to a decrease of approximately $2.2 million for stock awards

that have fully vested and a decrease of approximately $0.3 million for stock

awards forfeited, partially offset by an increase of approximately $1.3


     million from new grants; and




   ? a decrease in payroll and related costs of approximately $0.8 million
     resulting from a reduction in headcount.




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Research and development expenses:

For the three months ended September 30, 2021, R&D Expenses were approximately $18.8 million, compared to approximately $23.3 million for the three months ended September 30, 2020. R&D Expenses for the three months ended September 30, 2021 and 2020 were as follows:





Research and development expenses             For the Three Months Ended                   Change
(in thousands)                                       September 30,                    $               %
                                               2021                2020           2021/2020       2021/2020
Clinical trial expense                     $       8,396       $       8,257     $       139             1.7 %
Internal R&D                                       7,761               9,441          (1,680 )         -17.8 %
Consultant and contractors                         1,347               2,183            (836 )         -38.3 %
Stock-based compensation                           1,332               3,463          (2,131 )         -61.5 %
                                           $      18,836       $      23,344     $    (4,508 )         -19.3 %



For the three months ended September 30, 2021, R&D Expenses decreased by approximately $4.5 million compared to the same period in 2020, primarily attributable to the following:

? a decrease in stock-based compensation expense of approximately $2.1 million

primarily due to a decrease of $2.3 million for stock awards that have fully

vested and a decrease of approximately $0.3 million for stock awards

forfeited, partially offset by an increase of $0.5 million from new grants;


     and




   ? a decrease in Internal R&D of approximately $1.7 million, primarily due to a
     reduction in headcount.




Other income (expenses):



Other income (expenses)         For the Three Months Ended                  Change
(in thousands)                         September 30,                  $               %
                                   2021               2020        2021/2020       2021/2020
Interest income               $           13       $       22     $       (9 )         -40.9 %
Interest expense                      (3,121 )         (3,627 )          506           -14.0 %
Legal verdict expense                (24,498 )        (15,855 )       (8,643 )          54.5 %
Loss on debt extinguishment           (8,146 )              -         (8,146 )        -100.0 %
Other income                              71              128            (57 )         -44.5 %
                              $      (35,681 )     $  (19,332 )   $  (16,349 )          84.6 %




Interest expense:


For the three months ended September 30, 2021, we recognized approximately $3.1 million in interest expense, compared to $3.6 million of interest expense for the three months ended September 30, 2020. The decrease in interest expense was primarily the result of the interest expense for the milestone payments being paid to Pfizer in installments.





Legal verdict expense:


For the three months ended September 30, 2021, we recorded additional legal expense of $24.5 million primarily related to our outstanding class action matter. See Item 1. "Legal Proceedings" for further details.





Loss on debt extinguishment:


For the three months ended September 30, 2021, we recognized approximately $8.1 million in loss on debt extinguishment related to our debt refinancing during July 2021. See Item 2 "Liquidity and Capital Resources".







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Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020





Total revenue:



For the nine months ended September 30, 2021, total revenue was approximately $197.8 million, compared to $172.6 million for the nine months ended September 30, 2020.





Product revenue, net:



Product revenue, net was approximately $138.1 million for the nine months ended
September 30, 2021, compared to $146.7 million for the nine months ended
September 30, 2020. The decrease in product revenue, net was attributable to a
volume decrease of approximately 16.0% in bottles of NERLYNX sold, and an
increase in reserves for variable consideration from approximately 15.5% of
product revenue for the nine months ended September 30, 2020 to approximately
18.5% of product revenue for the nine months ended September 30, 2021. The
increase in reserves for variable consideration is primarily due to an increase
in Medicaid claims and government chargebacks as a percentage of gross revenue.
The decrease in product revenue, net was partially offset by an increase in
gross selling price that occurred in the third quarter of 2020 and in the first
and third quarter of 2021.



License revenue:



License revenue was approximately $50.3 million for the nine months ended
September 30, 2021, compared to approximately $22.7 million for the nine months
ended September 30, 2020. The increase in license revenue is due to a large,
upfront payment in connection with an amendment to a sub-license agreement
entered into during the nine months ended September 30, 2021.



Royalty revenue:



Royalty revenue was approximately $9.5 million for the nine months ended
September 30, 2021, compared to $3.1 million for the nine months ended September
30, 2020. The increase was due to increased product sales by our sub-licensees
as they continue to commercialize NERLYNX in additional territories.



Cost of sales:


Cost of sales was approximately $51.8 million for the nine months ended September 30, 2021, compared to $28.4 million for the nine months ended September 30, 2020. The increase in cost of sales was primarily attributable to a $20.0 million one-time license termination fee in February 2021.


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Selling, general and administrative expenses:





For the nine months ended September 30, 2021, SG&A Expenses were
approximately $93.8 million, compared to approximately $89.9 million for the
nine months ended September 30, 2020. SG&A Expenses for the nine months ended
September 30, 2021 and 2020 were as follows:



Selling, general, and administrative expenses For the Nine Months Ended

                   Change
(in thousands)                                            September 30,                    $               %
                                                    2021                2020           2021/2020       2021/2020
Payroll and related costs                       $      30,113       $      31,658     $    (1,545 )          -4.9 %
Professional fees and expenses                         30,028              32,252          (2,224 )          -6.9 %
Travel and meetings                                     3,380               4,023            (643 )         -16.0 %
Facilities and equipment costs                          4,175               4,276            (101 )          -2.4 %
Stock-based compensation                               23,281              13,523           9,758            72.2 %
Other                                                   2,855               4,150          (1,295 )         -31.2 %
                                                $      93,832       $      89,882     $     3,950             4.4 %



For the nine months ended September 30, 2021, SG&A Expenses increased by approximately $3.9 million compared to the same period in 2020, primarily attributable to the following:

? an increase in stock-based compensation expense of approximately $9.8 million

primarily due to the $13.6 million incremental expense resulting from the

modification of the term of Mr. Auerbach's warrant, and an increase of

approximately $3.4 million from new grants, partially offset by a decrease of


     approximately $5.9 million for fully vested grants and a decrease of
     approximately $1.3 million for awards forfeited.



This increase was partially offset by:

? a decrease in professional fees and expenses of approximately $2.2 million,

consisting of approximately $3.1 million for professional fees, primarily

related to decreased consultancy efforts related to marketing and

commercialization support, and lower audit and IT related expenses of

approximately $0.2 million, partially offset by an increase of approximately

$0.4 million in insurance premiums and an increase of approximately
     $0.7 million in legal fees in connection with various lawsuits;



? a decrease in payroll and related costs of approximately $1.5 million due to


     a reduction in headcount;



? a decrease in other expenses of approximately $1.3 million due to a recovery


     of bad debt expense of $1.0 million and other miscellaneous costs; and



? a decrease in travel and meeting related costs of approximately $0.6 million


     resulting from COVID travel restrictions.




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Research and development expenses:





For the nine months ended September 30, 2021, R&D expenses were
approximately $57.7 million, compared to approximately $73.5 million for the
nine months ended September 30, 2020. R&D expenses for the nine months ended
September 30, 2021 and 2020 were as follows:



Research and development expenses              For the Nine Months Ended                   Change
(in thousands)                                       September 30,                   $               %
                                               2021                2020          2021/2020       2021/2020
Clinical trial expense                     $      21,504       $      24,130     $   (2,626 )         -10.9 %
Internal R&D                                      26,230              29,564         (3,334 )         -11.3 %
Consultant and contractors                         4,870               6,218         (1,348 )         -21.7 %
Stock-based compensation                           5,098              13,578         (8,480 )         -62.5 %
                                           $      57,702       $      73,490     $  (15,788 )         -21.5 %



For the nine months ended September 30, 2021, R&D Expenses decreased by approximately $15.8 million compared to the same period in 2020, primarily attributable to the following:

? a decrease in stock-based compensation expense of approximately $8.5 million

primarily due to a decrease of approximately $8.6 million for fully vested

grants and a decrease of $1.3 million for awards forfeited, partially offset


     by an increase of $1.4 million from new grants;



? a decrease in internal R&D expense of approximately $3.3 million resulting


     from a reduction in headcount;



? a decrease in clinical trial expenses of approximately $2.6 million due to


     the close out of certain clinical trials and a reduction in patient
     enrollments and monitoring costs; and




   ? a decrease in consultant and contractor expenses of approximately
     $1.3 million due to the close out of certain clinical trials.




Other income (expenses):



Other income (expenses)         For the Nine Months Ended                  Change
(in thousands)                        September 30,                   $               %
                                  2021               2020         2021/2020       2021/2020
Interest income               $         147       $      474     $      (327 )         -69.0 %
Interest expense                    (10,089 )        (10,479 )           390            -3.7 %
Legal verdict expense                (9,781 )        (16,041 )         6,260           -39.0 %
Loss on debt extinguishment          (8,146 )              -          (8,146 )           0.0 %
Other income                            173              298            (125 )         -41.9 %
                              $     (27,696 )     $  (25,748 )   $    (1,948 )           7.6 %




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Legal verdict (expense) credit:





For the nine months ended September 30, 2021, we reduced our legal expense
accrual by approximately $20.0 million with respect to the Eshelman v. Puma
Biotechnology, Inc., et al. judgment, and we increased our legal expense accrual
by approximately $29.6 million with respect to the Hsu v. Puma Biotechnology,
Inc., et.al judgment, which resulted in a net legal verdict expense of $9.8
million for the period.



 Loss on debt extinguishment:



For the nine months ended September 30, 2021, we recognized approximately $8.1
million in connection with our repayment and termination of the Oxford Credit
Facility, which we replaced with the Athyrium Note. See Item 2. Liquidity and
Capital Resources.


Liquidity and Capital Resources





We have reported a net loss of approximately $44.7 million and net loss of
approximately $33.4 million for the three and nine months ended September 30,
2021, respectively. As of September 30, 2021, we had approximately $87.5 million
in cash and marketable securities. Our commercialization, research and
development or marketing efforts may require funding in addition to our
current cash and marketable securities. Additionally, in light of recent
developments in our class action lawsuit, we may need to make two payments
totaling approximately $54.2 million in January and June 2022 in settlement of
the litigation. As a result, the combination of these factors together with our
cash and marketable securities balances and recurring losses since
inception raise substantial doubt about our ability to continue as a going
concern.



 We may need to obtain additional funding to sustain operations and continue to
commercialize neratinib in the United States. Our ability to obtain additional
funding may be adversely impacted by a variety of issues including, uncertain
market conditions, the COVID-19 pandemic, our success in commercializing
neratinib, unfavorable decisions of regulatory authorities, adverse clinical
trial results or the outcomes of outstanding or new litigation. We cannot assure
you that such funding will be available on commercially reasonable terms, or at
all. While we have been successful in raising capital in the past, there can be
no assurance that we will be able to do so in the future. Our ability to obtain
funding may be adversely impacted by uncertain market conditions, including the
COVID-19 pandemic, our success in commercializing neratinib, unfavorable
decisions of regulatory authorities or adverse clinical trial results. The
outcome of these matters cannot be predicted at this time.



The following table summarizes our liquidity and capital resources as of September 30, 2021 and December 31, 2020, and for the nine months ended September 30, 2021 and 2020, and is intended to supplement the more detailed discussion that follows:





                                                              As of                    As of

Liquidity and capital resources (in thousands) September 30, 2021

     December 31, 2020
Cash and cash equivalents                              $             63,947     $            85,293
Marketable securities                                  $             23,596     $             8,096
Working capital                                        $             20,662     $            31,884
Stockholders' deficit                                  $            (10,922 )   $            (5,951 )




                                                        Nine Months Ended       Nine Months Ended
                                                       September 30, 2021      September 30, 2020
Cash provided by (used in):
Operating activities                                   $            26,085     $             6,408
Investing activities                                               (15,502 )                22,580
Financing activities                                               (31,929 )                    45
Net increase (decrease) in cash, cash equivalents
and restricted cash                                    $           (21,346 )   $            29,033




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On November 2, 2021, we implemented a restructuring of the organization in part
due to the impact of COVID-19 on our sales. The restructuring includes
a reduction in headcount of approximately 13% consisting primarily of commercial
and research personnel. We anticipate approximately $1.2 million in severance
related costs which includes salary, insurance premiums, and sales commissions.
This cost will be recorded in the fourth quarter of 2021. We believe that all
payments related to this plan will be made by March 31, 2022.



Operating Activities:



Cash provided by operating activities for the nine months ended September 30,
2021 consisted of a net loss of approximately $33.4 million, offset by a
decrease of approximately $39.5 million of non-cash items, including stock-based
compensation, depreciation and amortization, loss on extinguishment of debt of
approximately $3.8 million related to the write off of debt issuance costs and
provision for credit loss expense. These decreases were partially offset by an
increase in accrued expenses and other of approximately $3.7 million, an
increase in inventory of approximately $3.8 million, and an increase in our
post-marketing commitment liability of approximately $0.9 million which were
partially offset by decreases of approximately $5.8 million in accounts
receivable, net and other current assets, and an increase of
approximately $8.0 million in accounts payable.



Cash provided by operating activities for the nine months ended September 30,
2020 consisted of a net loss of approximately $45.0 million, offset by
approximately $34.2 million of non-cash items, such as stock-based compensation
and depreciation and amortization, an increase in accrued expense and other of
approximately $21.0 million, a decrease in prepaid expenses and other of
approximately $4.4 million, and a decrease in accounts receivable, net of
approximately $1.8 million. These increases were partially offset by a decrease
in accounts payable of approximately $6.7 million, an increase in other current
assets of approximately $3.1 million and other immaterial changes.



Investing Activities:


During the nine months ended September 30, 2021, cash used in investing activities was approximately $15.5 million, compared to net cash provided by investing activities of $22.6 million for the same period in 2020.





Cash used in investing activities during the nine months ended September 30,
2021 consisted of approximately $38.1 million of in purchases available-for-sale
securities, partially offset by maturities of approximately $22.6 million of
available-for-sale securities.



Net cash provided by investing activities during the nine months ended September
30, 2020 consisted of approximately $57.0 million of maturities of
available-for-sale securities, partially offset by the purchase of
available-for-sale securities of approximately $24.4 million and an increase in
intangible assets relating to the milestone achieved under the Company's license
agreement with Pfizer of $10.0 million.



Financing Activities:



During the nine months ended September 30, 2021, net cash used in financing
activities was $31.9 million. During July 2021, we
used approximately $8.5 million for the payment of prepayment costs, end of loan
payment costs and other extinguishment costs related to our credit facility with
Oxford, and approximately $1.9 million in payment of debt issuance costs related
to the Athyrium Notes, and $20.0 million was used for installment
payments relating to the milestone achieved under our license agreement with
Pfizer of $20.00 million.







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Oxford Loan and Security Agreement:





In October 2017, we entered into a loan and security agreement with SVB, as
administrative agent, and the lenders party thereto from time to time, or the
Original Lenders, including Oxford Finance, LLC, or Oxford, and SVB. Pursuant to
the terms of the credit facility provided for by the loan and security
agreement, or the Original Credit Facility, we borrowed $50.0 million. In May
2018, we entered into an amendment to the loan and security agreement, which
provided for an amended credit facility, or the Amended Credit Facility. Under
the Amended Credit Facility, the Original Lenders agreed to make term loans
available to us in an aggregate amount of $155.0 million, consisting of (i) an
aggregate amount of $125.0 million, the proceeds of which, in part, were used to
repay the $50.0 million we borrowed under the Original Credit Facility, and (ii)
an aggregate amount of $30.0 million that we drew in December 2018, which was
available under the Amended Credit Facility as a result of achieving a specified
minimum revenue milestone.



On June 28, 2019, or the Effective Date, we entered into an amendment and
restatement of the loan and security agreement, which provided for a new credit
facility, or the New Credit Facility, with Oxford, as collateral agent, and the
lenders party thereto from time to time, including Oxford, pursuant to which we
repaid the $155.0 million outstanding under the Amended Credit Facility, as well
as all applicable exit and prepayment fees, owed to the Original Lenders under
the Amended Credit Facility, using cash on hand and $100.0 million in new
borrowings from the New Credit Facility. Under the New Credit Facility, we
issued to Oxford new and/or replacement secured promissory notes in an aggregate
principal amount for all such promissory notes of $100.0 million evidencing the
New Credit Facility.



The New Credit Facility was secured by substantially all of our personal
property other than our intellectual property. We also pledged 65% of the issued
and outstanding capital stock of our subsidiaries, Puma Biotechnology Ltd. and
Puma Biotechnology B.V. The New Credit Facility limited our ability to grant any
interest in our intellectual property to certain permitted licenses and
permitted encumbrances set forth in the agreement.



The term loans under the New Credit Facility bore interest at an annual rate
equal to the greater of (i) 9.0% and (ii) the sum of (a) the "prime rate," as
reported in The Wall Street Journal on the last business day of the month that
immediately preceded the month in which the interest will accrue, plus (b) 3.5%.
We were required to make monthly interest-only payments on each term loan under
the New Credit Facility commencing on the first calendar day of the calendar
month following the funding date of such term loan, and continuing on the first
calendar day of each calendar month thereafter through August 1, 2021, or the
Amortization Date. Commencing on the Amortization Date, and continuing on the
first calendar day of each calendar month thereafter, we would have made
consecutive equal monthly payments of principal, together with applicable
interest, in arrears to each lender under the New Credit Facility, calculated
pursuant to the New Credit Facility. All unpaid principal and accrued and unpaid
interest with respect to each term loan under the New Credit Facility was due
and payable in full on June 1, 2024, or the Maturity Date. Upon repayment of
such term loans, we were also required to make a final payment to the lenders
equal to 7.5% of the aggregate principal amount of such term loans outstanding
as of the Effective Date.



At our option, we were able to prepay the outstanding principal balance of any
term loan in whole but not in part, subject to a prepayment fee of 3.0% of any
amount prepaid if the prepayment occurred through and including the first
anniversary of the funding date of such term loan, 2.0% of the amount prepaid if
the prepayment occurred after the first anniversary of the funding date of such
term loan through and including the second anniversary of the funding date of
such term loan, and 1.0% of the amount prepaid if the prepayment occurred after
the second anniversary of the funding date of such term loan and prior to the
Maturity Date.





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Athyrium Note Purchase Agreement:





On July 23, 2021, or the NPA Effective Date, we repaid the $100.0 million in
term loans outstanding under the New Credit Facility, as well as all accrued
interest, applicable exit, prepayment and legal fees owed to the lenders under
the New Credit Facility in an amount of approximately $9.2 million, using cash
on hand and $100.0 million in new borrowings from the issuance of notes under
the note purchase agreement, or the Athyrium Notes, that we entered into on the
NPA Effective Date with Athyrium Opportunities IV Co-Invest 1 LP, or, together
with its affiliates, Athyrium, as administrative agent, and the purchasers party
thereto from time to time, or the Purchasers, including Athyrium.



Pursuant to the Athyrium Notes, the Purchasers agreed to purchase from us, and
we agreed to issue to such Purchasers, notes payable by us. On the NPA Effective
Date, we issued to the Purchasers notes in an aggregate principal amount for all
such notes of $100.0 million. Subject to satisfaction of certain conditions set
forth in the Athyrium Notes, $25.0 million in additional notes remains available
to us under the Athyrium Notes.



The obligations of the Company under the Athyrium Notes are secured by
substantially all of our assets, including our intellectual property. We also
pledged 65% of the issued and outstanding capital stock of our subsidiaries,
Puma Biotechnology Ltd. and Puma Biotechnology B.V.



The notes bear interest at an annual rate equal to the sum of (a) 8.0% and (b)
Adjusted Three-Month LIBOR for such Interest Period (as defined in the Athyrium
Notes). We are required to make quarterly interest payments on each note issued
under the Athyrium Notes commencing on the last business day of September 2021,
and continuing on the last business day of each March, June, September and
December through June 30, 2024, or the NPA Amortization Date. Commencing on the
NPA Amortization Date, and continuing on the last day of each March, June,
September and December thereafter, we will make consecutive equal quarterly
payments of principal, together with applicable interest, in arrears to each
Purchaser, calculated pursuant to the Athyrium Notes. All unpaid principal and
accrued and unpaid interest with respect to each note issued under the Athyrium
Notes is due and payable in full on July 23, 2026, or the NPA Maturity Date. At
our option, we may prepay the outstanding principal balance of all or any
portion of the principal amount of the notes, subject to a prepayment fee equal
to (i) a make-whole amount if the prepayment occurs on or prior to the second
anniversary of the NPA Effective Date and (ii) 2.0% of the amount prepaid if the
prepayment occurs after the second anniversary of the NPA Effective Date by on
or prior to the third anniversary of the NPA Effective Date. Upon prepayment or
repayment of all or any portion of the principal amount of the notes (whether on
the NPA Maturity Date or otherwise), we are also required to pay an exit fee to
the Purchasers equal to 2.00% of the aggregate principal amount of such notes
prepaid or repaid.



The Athyrium Notes include affirmative and negative covenants applicable to us,
our current subsidiaries and any subsidiaries we create in the future. The
affirmative covenants include, among others, covenants requiring us to maintain
our legal existence and governmental approvals, deliver certain financial
reports, maintain insurance coverage and satisfy certain requirements regarding
deposit accounts. We must also (i) maintain a minimum amount of unrestricted
cash in deposit accounts subject to a control agreement in favor of Athyrium at
any time and (ii) achieve at least a specified minimum amount of revenue (based
on a combination of both sales of NERLYNX in the United States and royalty
revenues received by us for sales of NERLYNX outside the United States),
measured as of the last day of each four consecutive fiscal quarter period. The
negative covenants include, among others, restrictions on our transferring
collateral, incurring additional indebtedness, engaging in mergers or
acquisitions, paying dividends or making other distributions, making
investments, creating liens, selling assets and suffering a change in control,
in each case subject to certain exceptions.



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The Athyrium Notes also include events of default, the occurrence and
continuation of which could cause interest to be charged at the rate that is
otherwise applicable plus 2.0% and would provide Athyrium, as administrative
agent, with the right to exercise remedies against us and the collateral
securing the new credit facility, including foreclosure against the property
securing the obligations of us under the Athyrium Notes, including our cash.
These events of default include, among other things, our failure to pay
principal or interest due under the Athyrium Notes, a breach of certain
covenants under the Athyrium Notes, our insolvency, a material adverse change,
the occurrence of any default under certain other indebtedness in an amount
greater than $750,000 and one or more judgments against us in an amount greater
than $750,000 individually or in the aggregate that remains discharged or
otherwise satisfied, in each case, as further described in the Athyrium Notes.



As of September 30, 2021, there were $102.0 million in term loans outstanding
under the Athyrium Notes, representing all of our long-term debt outstanding as
of that date, and we were in compliance with all applicable covenants.



Current and Future Financing Needs:





We did not receive or record any product revenues until the third quarter of
2017. We have spent, and expect to continue to spend, substantial amounts in
connection with implementing our business strategy, including our planned
product development efforts, our clinical trials, our research and development
efforts and our commercialization efforts.



We may choose to begin new research and development efforts or we may choose to
launch additional marketing efforts. These efforts may require funding in
addition to the cash and cash equivalents totaling approximately $63.9 million
and $23.6 million in marketable securities available at September 30, 2021.
While our consolidated financial statements have been prepared on a going
concern basis, we expect to continue incurring significant losses for the
foreseeable future and will need to generate significant revenue to sustain
operations and successfully commercialize neratinib. While we have been
successful in raising financing in the past, there can be no assurance that we
will be able to do so in the future. Our ability to obtain funding may be
adversely impacted by uncertain market conditions, including the global COVID-19
pandemic, our success in commercializing neratinib, unfavorable decisions of
regulatory authorities or adverse clinical trial results. The outcome of these
matters cannot be predicted at this time.



In addition, we have based our estimate of capital needs on assumptions that may
prove to be wrong. Changes may occur that would consume our available capital
faster than anticipated, including the length and severity of the COVID-19
pandemic and measures taken to control the spread of COVID-19, as well as
changes in and progress of our development activities, the impact of
commercialization efforts, acquisitions of additional drug candidates and
changes in regulation. Potential sources of financing include strategic
relationships, public or private sales of equity or debt and other sources of
funds. We may seek to access the public or private equity markets when
conditions are favorable due to our long-term capital requirements. If we raise
funds by selling additional shares of common stock or other securities
convertible into common stock, the ownership interests of our existing
stockholders will be diluted. If we are not able to obtain financing when
needed, we may be unable to carry out our business plan. As a result, we may
have to significantly limit our operations, and our business, financial
condition and results of operations would be materially harmed. In such an
event, we will be required to undertake a thorough review of our programs, and
the opportunities presented by such programs, and allocate our resources in the
manner most prudent.


Non-GAAP Financial Measures





In addition to our operating results, as calculated in accordance with generally
accepted accounting principles, or GAAP, we use certain non-GAAP financial
measures when planning, monitoring, and evaluating our operational performance.
The following table presents our net loss and net loss per share, as calculated
in accordance with GAAP, as adjusted to remove the impact of stock-based
compensation. For the three and nine months ended September 30, 2021,
stock-based compensation represented approximately 9.5% and 18.7%  of our
operating expenses, respectively, compared to 14.3% and 16.6% for the same
respective periods in 2020, in each case excluding cost of sales. Our management
believes that these non-GAAP financial measures are useful to enhance
understanding of our financial performance, are more indicative of our
operational performance and facilitate a better comparison among fiscal periods.
These non-GAAP financial measures are not, and should not be viewed as,
substitutes for GAAP reporting measures.



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       Reconciliation of GAAP Net Loss to Non-GAAP Adjusted Net Loss and

        GAAP Net Loss Per Share to Non-GAAP Adjusted Net Loss Per Share

                 (in thousands except share and per share data)



                                             For the Three Months Ended           For the Nine Months Ended
                                                    September 30,                       September 30,
                                              2021                2020            2021                2020
GAAP net loss                              $   (44,672 )       $   (31,463 )   $   (33,350 )       $   (45,001 )
Adjustments:
Stock-based compensation -
Selling, general and administrative (1)          2,950               4,101          23,282              13,523
Research and development (2)                     1,332               3,464           5,099              13,579
Non-GAAP adjusted net loss                 $   (40,390 )       $   (23,898 

) $ (4,969 ) $ (17,899 )



GAAP net loss per share-basic              $     (1.09 )       $     (0.79 )   $     (0.82 )       $     (1.14 )
Adjustment to net loss (as detailed
above)                                            0.10                0.19            0.70                0.69
Non-GAAP adjusted basic net loss per
share (3) (4)                              $     (0.99 )       $     (0.60 

) $ (0.12 ) $ (0.45 )



GAAP net loss per share-diluted            $     (1.09 )       $     (0.79 )   $     (0.82 )       $     (1.14 )
Adjustment to net loss (as detailed
above)                                            0.10                0.19            0.70                0.69
Non-GAAP adjusted diluted net loss per
share (5) (6)                              $     (0.99 )       $     (0.60 )   $     (0.12 )       $     (0.45 )




(1) To reflect a non-cash charge to
operating expense for selling, general,
and administrative stock-based
compensation.
(2) To reflect a non-cash charge to
operating expense for research and
development stock-based compensation.
(3) Non-GAAP adjusted basic net loss per
share was calculated based on
40,813,609 and
40,520,041 weighted-average shares of
common stock outstanding for the three
and nine months ended September 30, 2021,
respectively.
(4) Non-GAAP adjusted basic net loss per
share was calculated based on
39,695,444 and 39,473,691
weighted-average shares of common stock
outstanding for the three and nine months
ended September 30, 2020, respectively.
(5) Non-GAAP adjusted diluted net
loss per share was calculated based
on 40,813,609 and 40,520,041
weighted-average shares of common stock
outstanding for the three and nine months
ended September 30, 2021, respectively.
(6) Non-GAAP adjusted diluted net loss
per share was calculated based
on 39,695,444 and 39,473,691
weighted-average shares of common stock
outstanding for the three and nine months
ended September 30, 2020, respectively.




Off-Balance Sheet Arrangements

We do not have any "off-balance sheet agreements," as defined by SEC regulations.





Contractual Obligations



In June 2020, we entered into a letter agreement, or the Letter Agreement, with
Pfizer relating to the method of payment associated with our achievement of a
milestone that triggered a $40.0 million payment under our license agreement
with Pfizer. The Letter Agreement permitted us to make the milestone payment in
installments with the majority of the amount payable to Pfizer (including
interest) by September 2021. All amounts related to the Letter Agreement were
paid in full during August 2021.



Other than as described in the preceding paragraph, there have been no material
changes outside the ordinary course of business to our contractual obligations
and commitments as described in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report on Form 10-K
for the year ended December 31, 2020.



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